Marcella Scarlett, Business Reporter
Scotia Investments Jamaica Limited has advised its clients that effective September 30, the company will no longer accept subscriptions to its Jamaican dollar Capital Management Account (CMA) and Government Securities Fund (GSF) products.
However, no decision has been made about existing investment in the funds, but the investment company plans to steer current investors towards other products.
"Right now, what is happening is that we are not accepting new funds in those products. What we are doing is making an assessment to decide on what we are going to do with the existing funds," said, chief executive officer of Scotia Investments, Lissant Mitchell.
"We won't turn away the clients who are already invested. What we will do is allow the investors to make the decision to switch over to other products when they are ready. We will help them, we will have discussions with them, and together we will come up with the best solution for them," he said.
Mitchell described the move as an adjustment of the product offerings, akin to a refreshment of the portfolio, which companies do from time to time.
He said Scotia Investments is able to offer similar products with better return to investors.
"For the CMA and the GSF, the rates are less attractive than the money market fund. The CMA is similar to a repo. Right now, we have a money market fund that is like a unit trust product that is offering rates somewhere around 4.9 per cent. The CMA and GSF are offering much lower than that," he said.
Scotia Investment's newly released third-quarter results show that the CMA and GSF combined are worth J$13.7 billion, down from J$14.6 billion a year ago. Five years ago, they were valued at J$15.9 billion.
Letter to investors
In a letter distributed to investors last month, the company explained that with interest rate cuts over the past three years, resulting from two debt swap of government bonds and the overall macroeconomic programme, certain fixed-income products have become less attractive to investors.
"In this line, we have taken the decision to discontinue our J$CMA and J$GSF products," the company wrote.
"We encourage you to invest in more attractive products in our offering. We are aware that these accounts are sometimes used for short-term liquidity needs, and stand ready to discuss how we will continue to satisfy this need with any of our alternative products."
The discontinuation of the products also fit within Scotia's plan to shift risk off its balance sheet, Mitchell indicated.
"This fits with our long-term strategy. Our money market and fixed-income product are off-balance sheet, and this fits in perfect with our long-term strategy to increase our off-balance sheet product offering, because the CMA and GSF are included in our balance sheet," he said.
The CMA is a fairly liquid investment as investor's money is readily available on request. The minimum investment period for the CMA is 30 days for JMD and US dollar funds, and 90 days for accounts denominated in pounds, Canadian dollar and euro. After those minimum periods have passed, investors may access their funds at any time.
Its underlying assets are commercial loans, securities and financial instruments issued or guaranteed by the Government of Jamaica (GOJ) .
CMA rates updated in May
According to the company's website, the rate for the CMA was last updated on May 13, 2013. The investment company's website indicates that the fund pays within a range of 0.03 per cent on investments of up to J$59,999 and 1.95 per cent for more than J$10 million.
The USD counterpart pays 0.013 per cent for up to US$999, and 0.75 per cent for US$100,000 and over.
For the GSF, an initial tenure of 30 days is required and investors are free to encash the funds anytime thereafter. The GSF is backed by a variety of securities and financial instruments secured by the GOJ or Bank of Jamaica.
No rates were available on the website for the GSF. Scotia says the rate is determined by prevailing market conditions, and are set on the first day of each month.
Mitchell re-emphasised that the discontinuation applies only to the Jamaican dollar funds.